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Everything You Know About Trade Promotion Management Is Wrong

A woman tasting a trade promotion sample at her local supermarket before making a purchase.
In-store merchandising and support can help consumer goods brands secure additional shelf space while encouraging consumers to try their products. [Hybrid Images / Getty]

Approximately $500 billion is spent on trade promotion each year. Yet 80% of consumer goods executives are unhappy with the results.

This year, 93% of CEOs said they’re focusing on growth. That means the battle for both shopper awareness and retail shelf space just got more competitive. 

In the current economy, pricing is forcing consumers to rethink their purchase decisions. At the store level, sustained revenue growth is a challenge: 90% of brands cannot simultaneously grow market share, category leadership, and profits. Make no mistake: Effective trade promotion management is key to keeping consumers reaching for your products while achieving profitable growth.

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What is trade promotion management?

Trade promotions help increase demand for a brand’s products in stores by offering retailers discounts, displays, and events that help them market items to consumers. It refers to in-store merchandising and support that helps consumer goods (CG) brands motivate consumers to reach for their products on the shelves. 

Trade promotion management (TPM)  includes the planning, management, and execution of these promotional activities. Done effectively, trade promotion management can secure additional shelf space from retailers.

Some examples of TPM include:

  • Planning discounts, bundles, and other special pricing offers within retail stores. 
  • Co-op advertising, where CG companies collaborate with retail partners and split costs to promote specific products, including in-store campaigns and ad campaigns.  
  • Slotting fees, which are paid to retailers to secure prominent placement or ideal shelf space within stores. 

It’s becoming increasingly important for brands to manage their trade promotion performance more efficiently to increase revenue growth. CG companies spend up to 27% of their revenue funding trade promotions. Trade spending – estimated at $500 billion per year – is on the rise. And yet, 80% of CG executives are unhappy with the results: up to 80% of promotion budgets fail to contribute to category growth. 

Why do consumer goods companies use TPM?

When done right, trade promotion lets CG companies maintain and increase their market share on retail shelves and remain competitive with new brands. Managing these activities efficiently and effectively, however, is the key to seeing the payoff.

When competing in retailers like grocery stores or big box stores, good trade promotion helps your products stand out from the crowd and remain top of mind with consumers. Great trade promotion management, in turn, ensures you see maximum outcome for every dollar you spend making that happen. Whether creating special product bundles, organizing a trade allowance, or launching a loyalty program, executing trade promotion management plans correctly can improve sales and growth, strengthen relationships with retailers, and maintain brand loyalty with consumers.    

What are the most common challenges in trade promotion management?

With so many moving parts, it’s easy to see why TPM initiatives are so often unsuccessful. Some of ‌the challenges CG companies face include:

  • A lack of data accuracy: When data is siloed or not tracked properly, measuring ROI is nearly impossible. It also makes budget tracking a headache, and forecasting becomes inaccurate.  
  • Relying on manual calculations: Without the help of a connected platform and predictive analytics, CG companies risk miscalculating ROIs from their promotional activities. This leads to inaccurate forecasting, so shifting consumer behaviors, seasonality, and other factors could fly under the radar, leaving your team guessing how to improve sales.
  • Dealing with multiple stakeholders: Because TPM involves multiple parties, it can be difficult to coordinate with individual retailers, marketing agencies, and internal teams all at once. Add in a few tight deadlines, and information can easily get lost along the way.  

How can technology improve TPM outcomes?

Modern trade promotion management tools can help CG companies overcome these challenges by improving efficiency, collaboration, and accuracy. By using your trusted customer data to power artificial intelligence (AI) solutions, you can do the following: 

Toss out your manual spreadsheets

Most CG companies still use disconnected systems, manual spreadsheets, and siloed teams to fund, plan, and track massive trade promotion budgets. This makes it difficult to keep everyone in the loop when things are going well or when they need adjusting. Combined with calculation methods that vary across multiple departments, it becomes impossible for all parties to agree on how much will be sold and, more importantly, how much should be spent. 

Brands that have automated their trade promotion management systems on a single platform, however, can achieve impressive results. Our data shows:

  • Redeploying funds to promotions that work well can increase revenue by 4%.
  • Making effective trade promotion investments can boost gross margin percentage by up to 5%.
  • Automating administrative tasks frees up 30% of account managers’ hours, allowing them to spend more time with customers.
  • Linking deduction management processes to trade programs can reduce unidentified items and write-offs by as much as 10%.
  • Ditching manual tools and redundant systems can decrease IT costs by up to 15%.

Balance traditional and emerging TPM channels

CG route-to-market strategies are complex. The rapid growth of new sales channels and additional points of sale means brands have to balance their traditional in-store tactics with emerging digital strategies. CG companies that connect in-store and digital interactions provide a seamless user experience (for internal and external stakeholders), which helps them win at the shelf. Our research found that 55% of CG companies have made this a priority.  

To make the most of trade dollars across channels, CG companies need to use first-party and syndicated data when planning their trade promotion strategy. Without an integrated promotional plan, brands may show gains with one customer and losses with another. To get all stakeholders on the same page, CG brands need a holistic view to plan, execute‌, and assess trade promotions. 

Optimize joint business planning for TPM

Retailers are responsible for over 90% of revenue for many CGs. Joint planning with retailers helps you know and grow your customers, define account metrics, and carry out forecasting and scenario planning with cross-functional teams. This helps you and your retailers achieve short-term tactical initiatives and long-term strategies. 

True joint planning and access to real-time data allow brands and retailers to collaborate. You can pivot quickly to stay ahead of the competition, ensure return on investment (ROI), and maintain successful partnerships with retailers. By easily accessing the right information, a CG organization can keep retailers informed across all departments by identifying issues and making necessary changes in real time. 

Empower your teams to make real-time decisions

In today’s digital economy, end customers, channel partners, and employees want the same personalization, responsiveness, and 24/7 engagement in business relationships they’ve come to expect as consumers. When you use real-time data for planning and managing resources across channels, you make their jobs easier. Access to information such as shelf availability, planogram adherence, shopper touchpoints, buyer data, promotion results, and consumer engagement lets stakeholders make quick and informed decisions. That way, when unexpected issues arise, the situation can be quickly fixed.

Traditional trade management is labor-intensive. A salesperson spends 25% of their time designing, implementing, and overseeing promotions. But when you connect and automate data, teams have more time for strategic planning. They can quickly carry out multiple simulations using AI to create baseline forecasts that predict uplifts and estimate volume and revenue against goals. Your team can see how different scenarios will affect ROI and make real-time adjustments. 

It’s time to rethink trade promotion management

Casting wide nets with trade dollars with the hope that something will catch does little to move business, forward. CG companies need to use modern trade promotion management techniques to see if their spending is yielding real value.

Trade planning should balance in-store and online promotion spending, using collaborative processes that give CG brands both increased revenue and improved margins while reducing costs.

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